The Opportunity Cost of Heuristics

(Graphic:Propaganda Remix Project)
How would an economist quantify the opportunity cost of the War on Terror? Would they show how many hospitals or highways or literacy programs might be funded from that money? Or would they illustrate to the average American what an extra percentage of income each month might look like? For many people, cutting the defense budget or Homeland Security budget and reducing your tax burden accordingly would constitute a significant paycheck raise. Money that could be spent on programs and causes chosen by an individual. Money that could be given to churches, colleges, aid programs, or toward savings to help one prepare for a disaster, A ‘disaster egg’ might have helped many during Katrina. But perhaps you think the government is more equipped to prepare your family than you are? That would be quite the ‘liberal notion’ though, wouldn’t it? Implicitly Pinko? See, this is an example of the paradox of the neo-conservative ideology. Hardly the design of the fiscal conservative! (cont.)

So why do we spend so much on ineffectual measures that lull the nation into a false sense of security, providing a distorted sense of control, while we ignore pressing threats and vulnerabilities? Why is it that we consider the possibility of bioterrorism but not the implications of epidemiology? Climate change?

Heuristics refers to biased human risk assessment. People, due to a variety of psychological and social factors, develop a disproportionate fear of certain potential threats that are in fact, statistically improbable. Now we know that this has factored into our nation’s response to the ‘war on terror’ and we know that this idea is reflected in our spending priorities. Now many out there claim that governmental bureaucracy is inherently corrupt, and opinions on national security run along a predictable spectrum. But reasonable people can tell the difference in their real lives between the merits of risk-prevention strategies. We can say that governments are corrupt, but that we demand RATIONAL spending priorities.

For those that believe the budget for Homeland Security is an appropriate reflection of spending priorities, consider the statistical likelihood of other events that we do little to prepare for- Whether liberal, conservative, or somewhere in between- how do you reconcile the disproportionate expense to our government?

Which is not to say that a terrorist attack cannot happen. But should the government have a blank check, spare no expense, on actions –half of which are misguided- to supposedly defend us? As Ben Friedman described in “The Real Cost of Homeland Security” Americans might consider some facts in the context of spending:

Friedman asks:

“Statistically speaking, the terrorist threat to America has always been low. So why are we spending such vast amounts on ineffectual 'Homeland Security'?”

Consider:

“As political scientist John Mueller notes, in most years allergic reactions to peanuts, deer in the road, and lightening have all killed about the same number of Americans as terrorism. In 2001, their banner year, terrorists killed one twelfth as many Americans as the flu and one fifteenth the number killed by car accidents.”

“Even if attacks killing thousands were certain, the risk to each of us would remain close to zero, far smaller than many larger risks that do not alarm us, or provoke government warnings, like driving to work every day. And if something far worse than September 11 does occur, the country will recover. Every year, tens of thousands Americans die on the roads. Disease preys on us. Life goes on for the rest. The economy keeps chugging. A disaster of biblical proportions visited New Orleans. The Republic has not crumbled. The terrorist risk to the United States is serious, but far from existential, as some would have it.”

“Most people's risk perception is confused. The world is complex. No one can be an expert in everything. Making judgments about risks requires mental shortcuts, what experts call heuristics. Heuristics subject us to biased risk assessment. Human psychology leads us to overestimate the likelihood of dangers that are novel and uncontrollable. The news media and social interaction reinforce these common errors. We also tend to overestimate risks that lend themselves to memorable images, like planes crashing into buildings. Like shark attacks and kidnapping by strangers, terrorism is strange, uncontrollable, and forms a ready mental image. So people overestimate terrorist's risk and demand excessive protection from it.”

“But if safety is expensive, then extra protection is dangerous, because it takes money and resources from more worthwhile ends.”

So, where do you stand on this? Do you think the expense is worth it,, and do you think the government is doing enough to reflect this investment? Do you think they have secured vulnerable places like borders and shipping ports with your money? If you had a choice between an extra 5% of income and HALF the ‘protection’…would you take it?